Answered

Westonci.ca offers fast, accurate answers to your questions. Join our community and get the insights you need now. Get detailed answers to your questions from a community of experts dedicated to providing accurate information. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

Suppose that in a given month $51 million is deposited into the banking system while $55 million is withdrawn. Also suppose that the Fed has set the reserve requirement at 25 percent and that banks have no excess reserves at the beginning of the month. What is the maximum amount of new checkable-deposit money that can be created (or removed) by the banking system as a result of these deposits and withdrawals?

Sagot :

Answer and Explanation:

The computation of the maximum amount of new checkable deposit money is given below:

The Net impact represent the decrease in the reserves by

= $55 million - $51 million

= $4 million

Now the

Multiplier = 1 ÷ Reserve requirement

= 1 ÷ 25%

= 4

Now Decrease in money supply is

= $4 million × 4

= -$16 million

Thank you for your visit. We're dedicated to helping you find the information you need, whenever you need it. Thank you for your visit. We're committed to providing you with the best information available. Return anytime for more. Thank you for visiting Westonci.ca, your go-to source for reliable answers. Come back soon for more expert insights.